Image courtesy of Clean Energy Resource Teams, from a workshop and tour on community solar gardens at Lake Region Electric Cooperative in Minnesota.

More and more, across the U.S., consumers want access to solar energy. However, according to a new GTM market report, only an estimated 13.5% of U.S. households have rooftops suitable for solar. In what many are hailing as the solution - community solar - the remaining 86.5% of households could benefit from solar power as if the panels were installed on their homes. Community solar makes solar an option for everyone: renters, apartment dwellers, owners with shaded rooftops, consumers with sub-optimal credit, people living in historic districts, and those hampered by unfavorable building codes or zoning ordinances.

Community solar goes by a few different names, including shared solar, solar gardens, and aggregated solar. Although ownership and billing models vary, the basic concept is that a third party developer, or sometimes a utility, builds a solar array and then a customer enters into a long-term contract at a fixed rate per kWh for a portion of the output of that solar array (similar to a power purchase agreement) or finances a portion of the array itself. In return, the customers receive a bill credit - usually called virtual net metering - that is proportional to their ownership share or portion of the energy the solar panel produces.

As interest in solar energy grows, community solar offers a competitive alternative to smaller rooftop systems. According to a new case study by the Brattle Group, community solar, at 12 to 19 cents per kWh, compares favorably to rooftop solar, at 14 to 23 cents per kWh. One reason is scale - community solar installations are not limited by the size of a single rooftop, and tend to be larger than rooftop systems. Another is performance: because community solar installations are not constrained by rooftop orientation, they can be sited in an optimal location and direction, maximizing output. Community solar also has added flexibility, in that individual community members can usually retain ownership if they move, and they can transfer their share to someone else if they no longer want to participate.

But it is not all sunshine and roses when it comes to community solar. As penetration of third party-owned community solar increases, utilities and solar advocates are going to have the same heated net metering debate as they do with rooftop solar. In addition, projects are larger as compared to rooftop installations, and they tend to take longer to develop due to permitting and siting. They also require the participation of sometimes hundreds of members in order to develop a critical mass. More stakeholders mean more complications and more time to completion. Finally, community solar participants tend to have a longer payback period compared to rooftop solar customers (although this is balanced by lower risk).

Minnesota Leads the Way

Currently, 24 states have community solar projects online, and 20 states have enacted or are moving toward shared renewable policies (project mandates, net metering rates, tax incentives, project caps, etc.). GTM projects that over 80% of new capacity by 2017 will be installed in just four states where community solar has taken hold: California, Minnesota, Colorado, and Massachusetts. But don’t let that fool you. Community solar is making noise nationwide.

Minnesota has been at the forefront of the community solar trend, with Xcel Energy receiving applications for over 900 MW of community solar since opening up the application process for its Solar Rewards Community Programin December 2014. The large influx of applications raised concerns from Xcel about the potential cost to non-solar ratepayers caused by net metering. Under Minnesota law, these “solar gardens” are capped at 1 MW each. Developers tried to work around that, however, by co-locating projects - with some reaching 100 MW of aggregate capacity. In June, the PUC approved a settlement that capped co-located applications at 5 MW through September 25, 2015, and then lowered the cap to 1 MW going forward.

In Hawaii, the state legislature in January passed Senate Bill 1050, which directs utilities to file plans with the PUC by October 1, 2015 on establishing a community-based renewable energy tariff. Hawaii Electric Company (HECO) had proposed a 260 kW solar pilot project, which would provide energy for about 50 customers, in order to help them better understand the intricacies of community solar. But the PUC nixed the proposal, instead telling HECO to focus on their October 1 filing, which could provide for a broader community solar program.

In Wisconsin, there are currently 12 projects either in development or in operation, all developed in the past year and a half. WPPI Energy, a power supplier for over 51 municipalities in the upper midwest, just received approval on August 21 to begin a community solar pilot program. Each WPPI Energy solar garden would generate around 250 kW and have about 50 to 100 subscribers. If successful, WPPI would expand the model into other regions.

In New York, the PSC has an open proceeding on the policies, requirements and conditions necessary for implementing a community net metering program.

Finally, a recent ruling by the IRS allowed a man in Vermont to take the 30% federal residential investment tax credit for his community solar investment. Though the ruling applied only to the individual taxpayer, making the ITC available to community solar part-owners would greatly increase the value proposition.

Community solar is still in its infancy but it is on a roll. Driven by consumers wanting more access to renewables, developers always on the lookout for the next big thing, and utilities who see it as a middle ground between utility scale and customer-sited renewables, community solar is set to take off.

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